Jan 24, 2012

The clay model of Myanmar's ambitious Dawei deepsea port and special
economic zone sprawls across a long table on the 43rd floor of the
headquarters of ItalianThai Development Pcl. Glossy posters hail it as
the "new global gateway of IndoChina".

But moving ahead with the
first phase of the project is proving slow, despite the dramatic reforms
sweeping Myanmar and the gradual lifting in Western sanctions as the
former British colony emerges from half a century of isolation a
prospect underlined on Monday by plans by the European Union to ease
some punitive measures.

In a rare interview, a senior executive
at ItalianThai Development outlined on Monday the company's farreaching
plans for a project that would transform the wild scrubland of southern
Myanmar into Southeast Asia's largest industrial complex.

Superhighways,
steel mills, power plants, shipyards, refineries, pulp and paper mills
and a petrochemical complex are part of the $50 billion project, as are
two golf courses and a holiday resort all strategically nestled between
rising powers India, China and Southeast Asia with a port on the Andaman
Sea.

The company hopes to secure $8.5 billion by yearend to
finance infrastructure and utilities under the first phase of the
project, and is confident it will find partners, but it also
acknowledges that convincing investors remains tough, particularly given
Myanmar's low level of infrastructure, visa restrictions and urgent
need for currency reforms.

Somchet Thinaphong, managing director of Dawei Development Co Ltd,
controlled by ItalianThai, told Reuters the first phase of construction
roads, a telecoms network, utilities and a port would be completed
within threeandahalf years, along with a power plant, but it remains
unclear what energy source the plant would use.

Somchet said its power plant partner, Ratchaburi Electricity Generating Holding
Pcl, would decide on fuel type within three months, including the
possibility of using natural gas funneled to the site on a 50 km (31
mile) pipeline from fields within Myanmar.

In the year to date,
ItalianThai shares have underperformed those of its peers and the
overall market due to uncertainty over the Myanmar project. The stock
closed down 1.16 percent on Monday, while the broader market rose 0.37
percent.

ItalianThai has an "Analyst Revision Score" of 10, far
lower than Ch Karnchang's 32 and SinoThai Engineering's 66. This is a
StarMine model that ranks stocks according to changes in analyst
sentiment, with 100 representing the highest rank.

"DOOR THAT IS OPENING"

"We
think this project is visionary. It is a door that is opening Myanmar.
At the same time, Myanmar has to open this door," he said.

As
Myanmar embarks on its most dramatic political changes since a 1962
military coup in what was then Burma, megaprojects like the 250 sq km
(97 sq mi) Dawei Special Economic Zone hint at a rapid acceleration in
both investment and development.

But Somchet also illustrated some of the challenges that vex investors in Myanmar.
While
they have completed construction of a road that will link Dawei to
Bangkok 250 km to the east, the border is not fully open due to disputes
between Myanmar and Thailand over its exact demarcation.
Construction
of the highway was delayed last year by ethnic Karen rebels who have
since signed a preliminary peace deal with the government.

Customs facilities still need to be built.

Somchet
is confident all that will be resolved. And while the road on the
Myanmar side is not yet paved, he expects that, too, to be completed in
about three years, creating a stable route for transport cargo that has
been sent to Dawei from the Middle East and Africa for shipping to
Bangkok and beyond in Southeast Asia,
bypassing the lengthy and congested Strait of Malacca. Other challenges include Myanmar's dual exchange rate.

While
the currency is pegged at six kyat to a dollar, it changes hands
unofficially at rates more than 120 times higher, forcing the government
to seek help from the International Monetary Fund.
ItalianThai
is looking for partners for the various parts of the project and the
main ones are likely to come from China, Japan and South Korea, he said.

A quarter of Dawei Development is now held by Max Myanmar Group, owned by Burmese tycoon Zaw Zaw, whose close ties to the Myanmar government put him on the U.S. targeted sanctions list in 2009.
A Nov. 15, 2007, U.S. diplomatic cable described Zaw Zaw as an "up and coming crony".
That
might have been a problem last year, when some potential partners,
according to Somchet, were reluctant to express their interest in the
project publicly for fear of upsetting business allies in the United
States.

But since U.S. Secretary of State Hillary Clinton's visit to Myanmar in December, the mood has changed dramatically, he said.

Although
he has had no major expressions of interest in the project by Western
investors, potential Asian partners are decidedly more open.

Somchet said he met recently with Japanese Trade and Industry Minister Yukio Edano, for instance.
ItalianThai
hopes Dawei could be a location for Japanese firms to build parts to be
used at car manufacturing plants in neighbouring Thailand, among other
uses.

An investment roadshow in South Korea is scheduled for late February.

Thailand's top lender, Bangkok Bank, is advising on the power project and Siam Commercial Bank on the whole project.